Daniel's notes on Read Write Own

Most of what people do online involves networks: The web and email are networks. Social apps like Instagram, TikTok, and Twitter are networks. Payment apps like PayPal and Venmo are networks. Marketplaces like Airbnb and Uber are networks. Almost every useful online service is a network.

Network rents of dominant tech businesses are exorbitant. The combined revenue of the five largest social networks—Facebook, Instagram, YouTube, TikTok, and Twitter—is about $150 billion per year. Nearly all major social networks have "take rates" —the percentage of revenue network owners take from network users—of 100 percent, or near to it. (YouTube is the one outlier with a take rate of 45 percent, for reasons we'll get into later.) This means the vast majority of that $150 billion goes to those companies instead of the users, creators, and entrepreneurs who contribute, build on top, and create value for all.

People spend about 3 hours per day in the thrall of an app store duopoly: Apple and Google. These companies charge up to 30% for payments. That's more than 10 times the payment industry norm. Such steep take rates are unheard of in other markets, and they reflect how powerful these companies have become.

Big Tech companies wield their power to squelch competitors, reducing options for consumers. Facebook and Twitter famously took antisocial turns in the early 2010s, cutting off third-party companies that were building apps for users on top of their platforms. These abrupt crackdowns punished many developers and, therefore, punished users by offering fewer products, fewer choices, and less freedom. Most other large social platforms have executed the same playbook. Today almost no new startup activity takes place on top of social networks. Developers know better than to lay foundations on quicksand.

The biggest platforms are anticompetitive. Amazon learns which products in its marketplaces are top sellers and then undercuts their makers with its own cheap basic versions. While physical retailers like Target and Walmart do this all the time with their own version of generic brands alongside name brands, the difference here is that Amazon is not just the store but the infrastructure. It would be as if Target controlled not just its store shelves but also the roads that all stores build on. This is too much control for one corporation to wield.

Software is special because it has a nearly unbounded range of expressiveness. Almost anything you can imagine can be encoded in software; software is the encoding of human thought, just like writing or painting or cave drawings. Computers take those encoded thoughts and run them at lightning speeds. This is why Steve Jobs once described the computer as "a bicycle for the mind." It accelerates our abilities.

Software is so expressive that it is better thought of not as engineering but as an art form. The plasticity and flexibility of code offer an immensely rich design space, far closer in the breadth of possibilities to creative activities like sculpting and fiction writing than engineering activities like bridge building.

As with other art forms, practitioners regularly develop new genres and movements that fundamentally shift what's possible. That's what's happening today. Just as the internet seemed to be consolidating beyond repair, a new software movement emerged that can reimagine the internet. The movement has the potential to bring back the spirit of the early internet, secure property rights for creators, reclaim user ownership and control, and break the stranglehold Big Tech has on our lives.

I see the history of the internet as unfolding in three acts. Each act is marked by a predominating network architecture. In the first act, called the "read era," circa 1990 to 2005, early internet protocol networks democratized information. Anyone could type a few words into a web browser and read about almost any topic through websites.

Now a new type of architecture is enabling the internet's third act. This architecture represents a natural synthesis of the two prior types, and it is democratizing ownership. In the dawning "read-write-own era," anyone can become a network stakeholder, gaining power and economic upside previously enjoyed by only a small number of corporate affiliates, like stockholders and employees. This new era promises to counteract Big Tech consolidation and return the internet to its dynamic roots. People can read and write on the internet, but they can also now own.

Some people will tell you that blockchains are a new type of database, one that multiple parties can edit, share, and trust. That’s a start. Blockchains fit the classic definition of computers. They store information and run rules encoded in software that can manipulate that information.

The significance of blockchains lies in the unique way that they, and the networks built on top of them, are controlled. With traditional computers, the hardware controls the software. Hardware exists in the physical world, where an individual or organization owns and controls it. That means that, ultimately, a person or group of people is in charge of both the hardware and the soft-ware. People can change their minds and therefore the software they control at any time.

blockchains are computers that can, for the first time ever, establish inviolable rules in software. This allows blockchains to make strong, software-enforced commitments to users. A pivotal commitment involves digital ownership, which places economic and governance power in the hands of users.

The ability for blockchains to make strong commitments about how they will behave in the future allows new networks to be cre-ated. Blockchain networks solve problems that plague earlier network architectures. They can connect people in social networks while empowering users over corporate interests. They can underpin marketplaces and payment networks that facilitate commerce, but with persistently lower take rates. They can enable new forms of monetizable media, interoperable and immersive digital worlds, and artificial intelligence products that compensate—rather than cannibalize—creators.

blockchains create networks, but unlike other network architectures—and here's the key point— they have more desirable outcomes. They can incentivize innovation, reduce taxes on creators, and let the people who contribute to the networks share in decision making and upside.

Blockchain networks combine the societal benefits of protocol networks with the competitive advantages of corporate networks. Software developers get open access, creators get direct relationships with their audiences, fees are guaranteed to stay low, and users get valuable economic and governance rights. At the same time, blockchain networks have the technical and financial capabilities to compete with corporate networks. Blockchain networks are a new construction material for building a better internet.

Real innovation takes time to generate financial returns. That's why most venture capital funds (ours included) are structured as ten-year funds, with purposefully long hold periods. Producing valuable new technologies can take up to a decade and sometimes longer.